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LSE Growth Commission
London, 2 May 2012
Measuring Material
Well-being
Paul Schreyer (OECD)
1. Background
OECD work on well-being covers 3
dimensions
1. Material well-being: mainly national
accounts-related measures
2. Quality of life:
i) Health status; ii) Work and life balance; iii)
Education and skills; iv) Civic engagement and
governance; v) Social connections; vi)
Environmental quality; vii) Personal security;
and viii) Subjective well-being
3. Sustainability (Environment, human capital)
OECD approach
1. Multi-dimensional
2. Focus on households and individuals
3. Focus on outcomes
4. Distributions important
OECD report
•The report paints a picture
of people’s lives in OECD
countries and other major
economies, based on a
dashboard of indicators
•It will be updated every 2
years
2. Measures of material well-being
Upfront, a word on GDP…
GDP is a good measure for
monitoring macro-economic
activity
• Needed for macro-economic policies,
• Output , capacity utilisation
• Competitiveness
• Demand for jobs
• Productivity
• ...in short, for the supply-side of the
economy
A word on GDP…(cont’d)
• Needs to be supplemented but not
supplanted by other measures
• ‘GDP and beyond‘ rather than ‘Beyond
GDP’
2 a. Total economy
Better use of existing national accounts
measures (1)
• Total Economy:
– Income rather than production
– National rather domestic: account for income
payments in and out of the country, e.g. remittances
– Net rather than gross: account for
• Depreciation of fixed assets
• Depletion of natural resources (mineral & energy resources,
soil, timber, water, aquatic resources)
– Real measures rather than volumes: deflate with
consumption price index
 Real net national income, depletion-adjusted
Needed: environmental information:
OECD’s work on green growth
• Implementation of new System of
Environment-Economic Accounts
• Green growth indicators: includes index of
natural resource use
same statistical information as for
depletion adjustment
2 b. Households
Differences between GDP and household income
growth within countries are often as large as crosscountry differences in GDP growth (1998-2008)
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Household disposable income
GDP
Better use of existing national accounts
measures (2)
• Household sector:
– Disposable income: capture monetary transfers,
taxes and incomes received from and paid to abroad
– Adjusted disposable income: capture government
services in kind (health, education, housing)
– Real measures rather than volumes: deflate with
consumption price index
– Add distributional information: e.g. median
income
Real median adjusted disposable household
income
OECD Project
• Examine coherence of micro data on household income
with national accounts
• Use micro-information on income distribution to
disaggregate national accounts household sector
• 20 pilot countries
• First set of results end 2012
• Periodic publication afterwards
Example: Adjusted disposable HH income in
France
per CU, in euro
Q2
Q3
Q4
Q5
Primary income
7 500
17 200
24 400
32 800
60 600
Contributions and taxes
-2 800
-6 600
-9 800 -13 500 -24 800
Benefits and other transfers
5 400
5 800
6 400
7 500
14 200
10 100
16 400
21 000
26 800
50 000
5,0
24 900
Disposable income
Q5/Q1
All
households
Q1
8,1
28 600
-11 500
7 800
Social transfers in kind
Adjusted disposable income (after social transfers in
kind)
Consumption expenditure
7 400
5 900
5 400
5 000
5 100
0,7
5 800
17 500
22 300
26 400
31 800
55 100
3,2
30 700
9 900
15 400
19 800
24 400
33 100
3,3
20 600
Actual consumption
17 300
21 400
25 100
29 400
38 200
2,2
26 400
Social transfers in kind in % of disposable income
Social transfers in kind in % of actual consumption
73
43
36
28
26
22
19
17
10
13
Source: Fesseau and Le Laidier (2010).
23
22
Summary
• ‘GDP and beyond’, not ‘Beyond GDP’
• Well-being is multidimensional and requires measures
of material well-being and quality of life
• For material well-being, 2 types of information:
– Real net national income, depletion-adjusted
– Real adjusted disposable household income, distributionadjusted
• Also: periodically, assess households’ consumption of
own-account services but not suitable for the core
national accounts
Thank you for your attention!
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